We've known for a while that this was coming, but the time is now upon us.

Starting tomorrow, it will be legal for merchants in most states to pass along swipe fees to customers who use credit cards.

It's thought that the majority of merchants (especially large chains) will not be imposing these fees, but I think it would be informative to share reports of any fees encountered.

A common argument is that this will benefit cash/check/debit customers, because merchants who impose this fee will lower their prices, so it'll also be interesting to find out if that actually happens (place your bets now).

To avoid surprising consumers with the new fee, retailers
must provide “clear disclosure” (such as signage) of any
checkout fees:

* at the store entrance,
* at the point of sale, offline and online, and
* on the customer’s receipt.

The disclosure on the receipt must list the amount of the
checkout fee, the fact that the merchant is imposing the
charge and that the fee is not greater than what it costs
the retailer to accept credit and charge cards.

Interesting word choice. These states are still part of the United States and merchants in those states are not exempt from federal law. They are also subject to state law (again, not exempt). From your link:

Checkout fees are illegal and, therefore, not allowed in 10 states. The laws of each state would determine whether it would be legal for companies based in other states to charge residents of its state. Residents of these states who encounter retailer checkout fees can report them to the state attorney general.

sscritic wrote:Interesting word choice. These states are still part of the United States and merchants in those states are not exempt from federal law. They are also subject to state law (again, not exempt).

This new policy isn't the result of new law. It is the result of a settlement in private antitrust litigation between two sets of businesses -- large retailers as plaintiffs and credit card companies as defendants. A private litigation settlement does not override state law.

One point I'm not entirely sure on -- I've verified that PIN-based debit card transactions will not be subject to fees, but I'm not sure about signature-based debit card transactions. I've seen some sources saying they'll be exempt, and some saying they'll be subject to the fees, but at the lowest rate (i.e. 1.5%).

So if you have a debit card that you only run as credit & don't know the PIN for, it might be beneficial to call the bank and reset the PIN to something you know. Then you'll have a good backup payment method if you encounter a merchant with this fee and it's not convenient to go elsewhere. I have a rewards checking account with a debit card I have to use 12 times a month, but I never learned the PIN, so I'm planning on getting that sorted out on Monday.

I've also heard that rewards credit cards will be subjected to the highest 4% rate, so a non-rewards card may be a feasible backup as well.

Visa and MasterCard have rules that require retailers to handle credit cards the same way in all of their stores across the country. That means a chain with stores in any of the 10 states where a surcharge is banned would not be able to have a surcharge at any of its stores.

jeffyscott wrote:Visa and MasterCard have rules that require retailers to handle credit cards the same way in all of their stores across the country. That means a chain with stores in any of the 10 states where a surcharge is banned would not be able to have a surcharge at any of its stores.[/i]

I wonder how this would work with independently-owned franchises, where the individual stores have their own merchant account. I know a lot of restaurant chains are like that.

sscritic wrote:Interesting word choice. These states are still part of the United States and merchants in those states are not exempt from federal law. They are also subject to state law (again, not exempt).

This new policy isn't the result of new law. It is the result of a settlement in private antitrust litigation between two sets of businesses -- large retailers as plaintiffs and credit card companies as defendants. A private litigation settlement does not override state law.

I use exempt in two situations:

1) there is a requirement that applies, except for those that are exempt. For example, interest is taxed, except for exempt interest.

2) there is a prohibition that applies, except for those that are exempt. For example, during prohibition, alcohol was prohibited except for use in religious ceremonies.

In this case, some people are being given permission. I have no idea what it means to be exempt from a permission. I permit my grandchildren to have a scoop of ice cream for dessert when the come over to my house. If I exempt the four year old, does that mean she gets no scoops or that she gets two? I have no idea. I still think exempt is an interesting word choice in this situation.

I wonder how this is going to affect those high interest paying checking accounts (such as I have). They require you to make a minimum of 12 credit card transactions per month to qualify for your interest; meaning that the swipe fees are subsidizing this. If they are no longer collecting as much in swipe fees, will this affect the interest rate these accounts pay?

We don't know where we are, or where we're going -- but we're making good time.

If, rather than tacking on surcharges, merchants are able to negotiate lower credit card transaction fees as a result of this settlement, then I would expect to see credit card rebates and sign up bonuses to decline.

Handling cash is not free either, perhaps the credit card transaction fees will ultimately drop to the point where the costs are about equal to the cost of handling cash. For small, independent, businesses (which may not report all cash receipts) the cost of handling cash could be much less than it is for larger businesses such as national retail chains.

There seems to be conflicting information on Amex, the NBC article that I had linked above says Amex prohibits surcharging, others say they permit it, but...

American Express has its own rule that says merchants must treat every form of electronic payment equally — and that means that to add the surcharge to American Express transactions, the merchant would have to add it to every other card it accepted, including debit cards. But both Visa and MasterCard prohibit surcharges on debit cards — Catch-22! — which effectively means merchants cannot add a surcharge to any transaction.

I was glad to see that TX retailers will not be making a charge for CC use since we use our Discovercard for about 99% of money spent. My favorite liquor store ( Spec's) does give a 5% discout for using cash/debit card.

Part-Owner of Texas |
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“The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle

Paying a surcharge for credit card usage appears to be completely different from a legal perspective than receiving a discount for paying in cash, even though the reality in pricing could be exactly the same; see "Credit Card Surcharges vs. Cash Discounts". Most of the 10 states that prohibit credit card surcharges explicitly allow cash discounts per Visa's citation of their state laws.

Last edited by stoub on Sun Jan 27, 2013 3:30 pm, edited 1 time in total.

momar wrote:How much money does it cost these stores, especially a place like a grocery store with long lines, to handle cash and checks?

Bite your nose and all.

By the same token, what does it cost the banks to process transactions? I doubt it is anywhere near the 2-3% that is being charged. In Australia, they apparently reduced these interchange fees from 0.95% to 0.5% a decade ago. http://en.wikipedia.org/wiki/Interchang ... ew_Zealand

momar wrote:How much money does it cost these stores, especially a place like a grocery store with long lines, to handle cash and checks?

Turns out that there is a excellent way to find out. It's called a free market and price discovery. Under the new rules retailers will be able to discover exactly how much credit card transactions are worth to them and how much they are willing to avoid fees by taking cash. Some retailers may decide to split the difference, charging half the transaction fee for credit cards, depending their own judgement of the value of credit card transactions. It also allows customers to transparently decide if they are willing to pay a 2% to 4% sales tax for the convenience of plastic. The old conditions imposed by the Visa/Mastercard duopoly prevented a free market in credit card transactions. There are still too many restrictions imposed by the credit card companies, but at least this is a small step in the right direction.

Jack wrote:
Turns out that there is a excellent way to find out. It's called a free market and price discovery. Under the new rules retailers will be able to discover exactly how much credit card transactions are worth to them and how much they are willing to avoid fees by taking cash. Some retailers may decide to split the difference, charging half the transaction fee for credit cards, depending their own judgement of the value of credit card transactions. It also allows customers to transparently decide if they are willing to pay a 2% to 4% sales tax for the convenience of plastic. The old conditions imposed by the Visa/Mastercard duopoly prevented a free market in credit card transactions. There are still too many restrictions imposed by the credit card companies, but at least this is a small step in the right direction.

Given that any national retailer will be unable to avail themselves of this it hardly seems likely that this will change much.

Further, studies from Australia where fees are allowed suggest that the fees mostly hurt consumers.

Yes, those who insist on continuing to use credit cards, should we become like Australia, would pay higher costs. People like me would lose the freebies we've been getting. Sensible people would simply switch to debit and cash.

jeffyscott wrote:
Yes, those who insist on continuing to use credit cards, should we become like Australia, would pay higher costs. People like me would lose the freebies we've been getting. Sensible people would simply switch to debit and cash.

jeffyscott wrote:
The current system in the US hurts consumers who don't use credit cards, forcing them to subsidize consumers (like myself) who not only use the cards, but collect cash, airline tickets, etc.

Stop forcing me to subsidize paper money and coins and all the costs that go along with handling/counting/securing/moving them.

"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep

momar wrote:How much money does it cost these stores, especially a place like a grocery store with long lines, to handle cash and checks?

Turns out that there is a excellent way to find out. It's called a free market and price discovery. Under the new rules retailers will be able to discover exactly how much credit card transactions are worth to them and how much they are willing to avoid fees by taking cash. Some retailers may decide to split the difference, charging half the transaction fee for credit cards, depending their own judgement of the value of credit card transactions. It also allows customers to transparently decide if they are willing to pay a 2% to 4% sales tax for the convenience of plastic. The old conditions imposed by the Visa/Mastercard duopoly prevented a free market in credit card transactions. There are still too many restrictions imposed by the credit card companies, but at least this is a small step in the right direction.

As mentioned, stores are already free to give cash discounts. Almost none do.

"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep

jeffyscott wrote:
The current system in the US hurts consumers who don't use credit cards, forcing them to subsidize consumers (like myself) who not only use the cards, but collect cash, airline tickets, etc.

Stop forcing me to subsidize paper money and coins and all the costs that go along with handling/counting/securing/moving them.

Nobody is forcing you to do anything. The new rules give you a choice which you didn't have before. A choice is exactly the opposite of force.

jeffyscott wrote:
The current system in the US hurts consumers who don't use credit cards, forcing them to subsidize consumers (like myself) who not only use the cards, but collect cash, airline tickets, etc.

Stop forcing me to subsidize paper money and coins and all the costs that go along with handling/counting/securing/moving them.

Nobody is forcing you to do anything. The new rules give you a choice which you didn't have before. A choice is exactly the opposite of force.

People who continue to use cash instead of switching to electronic payment increase the costs to business and society as a whole associated with the use of cash. Because we all pay the same prices, it seems pretty obvious that I have to pay for that Brinks truck out front.

How do you calculate the deadweight loss to society when we all go to the ATM every couple days? The cost of having extra ATMs? The increased time waiting in line or waiting for a gas pump?

"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep

momar wrote:Stop forcing me to subsidize paper money and coins and all the costs that go along with handling/counting/securing/moving them.

Cash handling/counting/securing/moving is a red herring. The true competition to credit cards is debit cards. If debit cards are discounted people naturally shift to debit cards, not cash. Let people have a real choice between debit card discount and credit card rewards.

momar wrote:Stop forcing me to subsidize paper money and coins and all the costs that go along with handling/counting/securing/moving them.

Cash handling/counting/securing/moving is a red herring. The true competition to credit cards is debit cards. If debit cards are discounted people naturally shift to debit cards, not cash. Let people have a real choice between debit card discount and credit card rewards.

As the econ policy paper I posted up a bit shows there is an independent value to the credit component that is not present in debit cards. But I do concur that debit-credit card is perhaps a better trade off point.

momar wrote:People who continue to use cash instead of switching to electronic payment increase the costs to business and society as a whole associated with the use of cash. Because we all pay the same prices, it seems pretty obvious that I have to pay for that Brinks truck out front.

You are making claims out of thin air. You see, there is a very good way of determining those costs you hypothesize. Free markets make a choice and optimize efficiency. If retailers decide that paying 2% to 4% of their revenues to credit card companies is cheaper than handling cash, then they will make that choice. If they find that it is not worth giving up 2% to 4% of their revenues to credit card companies rather than handle cash, then they will make that choice. Consumers also get a choice of whether they want to pay a 2% to 4% sales tax on all of their purchases. You will have your choice of patronizing all cash/debit or all credit businesses. Free markets are about choice. Granted, the credit card market is still far from a free market because of other anti-competitive restrictions.

And as tbf points out, the real battle is not between cash and credit -- it is between debit and credit. Previously you were forced to pay the same amount when using debit and credit, even though debit fees are much lower.

crowd79 wrote:These businesses that charge a 4% fee on top of my CC purchases will lose my business. Take note of it now, Retailers.

They are already charging you for it at every business you patronize and apparently you didn't know it. You just can't see it because the Visa and Mastercard rules are intended to conceal it from you. Wouldn't it be nice to see it up front and have a choice whether you want to pay it or choose a different business? You couldn't do that under the old rules.

Am I misunderstanding something here? These fees are already being levied on the transaction and the credit card company is taking their cut of every credit card purchase you make. It's like the employer portion of the payroll deduction tax; the difference between what the employer pays and you receive can be considered a tax on your salary even if it doesn't all show up on your W2.

My understanding was that this legislation just makes these fees more visible, allowing the merchant to break them out separately and allowing the consumer to choose whether to pay them. So to me this seems like a good thing.

momar wrote:People who continue to use cash instead of switching to electronic payment increase the costs to business and society as a whole associated with the use of cash. Because we all pay the same prices, it seems pretty obvious that I have to pay for that Brinks truck out front.

You are making claims out of thin air. You see, there is a very good way of determining those costs you hypothesize. Free markets make a choice and optimize efficiency. If retailers decide that paying 2% to 4% of their revenues to credit card companies is cheaper than handling cash, then they will make that choice. If they find that it is not worth giving up 2% to 4% of their revenues to credit card companies rather than handle cash, then they will make that choice. Consumers also get a choice of whether they want to pay a 2% to 4% sales tax on all of their purchases. You will have your choice of patronizing all cash/debit or all credit businesses. Free markets are about choice. Granted, the credit card market is still far from a free market because of other anti-competitive restrictions.

And as tbf points out, the real battle is not between cash and credit -- it is between debit and credit. Previously you were forced to pay the same amount when using debit and credit, even though debit fees are much lower.

I wasn't aware that anyone forced businesses to take credit.

"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep

Jack wrote:They are already charging you for it at every business you patronize and apparently you didn't know it. You just can't see it because the Visa and Mastercard rules are intended to conceal it from you. Wouldn't it be nice to see it up front and have a choice whether you want to pay it or choose a different business? You couldn't do that under the old rules.

It remains to be seen whether the merchants that choose to take advantage of this settlement will actually lower their prices for cash customers.

At this point, it's just a theory.

Many believe that merchants will keep their prices the same for cash customers, and add the fee for credit card customers, meaning no customers win.

I think it's important to carefully observe which businesses choose to pass along the swipe fees, and note whether they lower their prices by a comparable amount. If not, they deserve to be called out on it.

Last edited by SSSS on Sun Jan 27, 2013 7:28 pm, edited 2 times in total.

momar wrote:People who continue to use cash instead of switching to electronic payment increase the costs to business and society as a whole associated with the use of cash. Because we all pay the same prices, it seems pretty obvious that I have to pay for that Brinks truck out front.

You are making claims out of thin air. You see, there is a very good way of determining those costs you hypothesize. Free markets make a choice and optimize efficiency. If retailers decide that paying 2% to 4% of their revenues to credit card companies is cheaper than handling cash, then they will make that choice. If they find that it is not worth giving up 2% to 4% of their revenues to credit card companies rather than handle cash, then they will make that choice. Consumers also get a choice of whether they want to pay a 2% to 4% sales tax on all of their purchases. You will have your choice of patronizing all cash/debit or all credit businesses. Free markets are about choice. Granted, the credit card market is still far from a free market because of other anti-competitive restrictions.

And as tbf points out, the real battle is not between cash and credit -- it is between debit and credit. Previously you were forced to pay the same amount when using debit and credit, even though debit fees are much lower.

I wasn't aware that anyone forced businesses to take credit.

I would also add that I don't think I am imagining those cash trucks I see.

"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep

It remains to be seen whether the merchants that choose to take advantage of this settlement will actually lower their prices for cash customers.

At this point, it's just a theory.

Many believe that merchants will keep their prices the same for cash customers, and add the fee for credit card customers, meaning no customers win.

I think it's important to carefully observe which businesses choose to pass along the swipe fees, and note whether they lower their prices by a comparable amount. If not, they deserve to be called out on it.

I've seen this happen already, at of all places, the vending machines in my office. There were signs posted earlier this week stating something along the lines of "Effective immediately, all credit card transactions will cost 10 cents more as the price listed in already lower than the retail price." Sure... no win for consumers.

Furynation wrote:I've seen this happen already, at of all places, the vending machines in my office. There were signs posted earlier this week stating something along the lines of "Effective immediately, all credit card transactions will cost 10 cents more as the price listed in already lower than the retail price." Sure... no win for consumers.

I'm having trouble parsing the grammar of that sign, but it sounds like they didn't actually lower their cash prices, they just increased their credit card prices? That's what a lot of people were afraid would happen. Also, it sounds like they breached their merchant agreement by implementing the change before today.

Most gas stations in my area have cash discounts. The cashback on my credit card is currently more than the cash discount.

ARCO gas stations in my area stopped taking credit cards over 25 years ago. The price of gas at an ARCO is usually about 10 cents a gallon cheaper. I always carry cash to buy gas at ARCO stations. If stores give me a discount to buy something with cash, then I will use cash at that store.